Ulster Bank NI PMI, June 2014

Ulster Bank PMI Northern Ireland

The above charts plot the seasonally adjusted indicators of business conditions in Northern Ireland. Index readings above 50.0 signal an increase on the previous month while readings below 50.0 signal a decrease.

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The Ulster Bank Northern Ireland PMI® is produced by Markit Economics, an independent research company that produces highly-regarded surveys of business conditions in nations around the world.

The Ulster Bank Northern Ireland PMI® (Purchasing Managers’ Index®) is produced by Markit Economics.

The report features original survey data collected from a representative panel of companies based in Northern Ireland and operating in the manufacturing, service, construction and retail/wholesale sectors.

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®

Current period of growth in output extends to one yearThe current sequence of output growth in the Northern Ireland private sector extended to a year in June, helped by a further increase in new business. With workloads continuing to rise, panellists increased their staffing levels. Meanwhile, both input costs and output prices rose at faster rates than in May.

Further expansion in activity in JuneAs has been the case on a monthly basis throughout the past year, business activity at Northern Ireland private sector firms increased in June. The rate of expansion remained sharp and was slightly faster than the UK-wide average, despite slowing from the previous month. Activity rose across all four monitored sectors, led by retail and construction.

Respondents mainly linked higher activity to another increase in new business, the thirteenth in as many months. The latest rise in new orders was sharp, albeit the weakest since February. As with activity, the retail sector posted the fastest growth in new business. New export orders also increased, with panellists reporting greater volumes of incoming new work from the Republic of Ireland.

Marked rise in employmentHigher new orders led to a further increase in backlogs of work in June. Although slowing from the previous month, the rate of accumulation was solid and sharper than that seen across the UK as a whole.

Companies responded to additional workloads by taking on extra staff. Employment in Northern Ireland has now increased in each of the past 12 months. While slowing from the previous month, the rate of job creation remained marked in June. Staffing levels rose across all four monitored sectors, led by retail and manufacturing.

Faster increase in input costsThe rate of cost inflation in Northern Ireland remained much faster than the UK average in June, and picked up from that seen in May. Reasons for the latest rise in cost burdens included higher prices for energy and raw materials, and increased staff costs. The fastest increase in input prices was at construction firms.

Some companies were able to pass on higher input costs to their clients in June, helped by improving demand. This contributed to a fourth successive monthly increase in output prices. However, other respondents indicated that they had offered discounts in order to encourage new business. As a result, the rate of inflation was only modest, despite quickening from May. Prices charged fell at manufacturing firms, but rose in the three remaining sectors.

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15th July 2014

Higher Same Lower Net Index S.Adj'd S.Adj'd % % % +/- 50=nochg Index Index

2014 Jan 32.7 44.0 23.3 9.4 54.7 60.4 59.1 Feb 33.5 49.6 16.9 16.6 58.3 58.1 58.6 Mar 29.2 59.2 11.5 17.7 58.8 56.6 58.2 Apr 41.5 53.9 4.6 36.9 68.5 61.9 59.3 May 29.6 61.8 8.6 21.0 60.5 60.6 59.1 Jun 28.4 57.3 14.4 14.0 57.0 59.0 58.4

Q. Is the level of output or business activity at your company higher, the same or lower this month than one month ago?

Output / Business Activity

Ulster Bank Northern Ireland PMI®

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Business activity at companies in Northern Ireland increased again in June, extending the current sequence of growth to a year. The rate of expansion remained sharp, despite easing slightly from the previous month. The increase in output at Northern Ireland companies was marginally faster than the UK average. Where activity rose, this was largely reflective of increased new orders. Around twice as many respondents signalled a rise in output as posted a fall. The retail sector registered the sharpest increase in activity, followed by construction. Manufacturers and service providers also recorded strong expansions of activity during the month.

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Q. Is the level of new orders or incoming new business at your company higher, the same or lower this month than one month ago?

Q. Is the level of business outstanding (i.e. work not yet commenced or completed) at your company higher, the same or lower this month than one month ago?

Northern Ireland Companies All UK

By sector

Construction Manuf- Services acturing

‘14 Apr 62.3 56.4 63.3 May 67.7 56.2 60.8 Jun 63.9 56.7 59.0



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As has been the case in each month since June last year, new business increased in the Northern Ireland private sector during June. The rate of expansion slowed to the weakest since February, but was sharp nonetheless. Meanwhile, the UK as a whole posted an accelerated rise in new work that was faster than that seen in Northern Ireland. Those respondents that posted an increase in new orders linked this to greater confidence among clients which had made them more willing to invest. The retail and construction sectors posted the fastest rates of growth in new business, while services new orders rose at the weakest pace since last October.


By sector


‘14 Apr 60.4 56.0 65.5 May 63.4 56.7 62.2 Jun 62.1 58.4 57.1


2014 Jan 16.5 66.0 17.4 -0.9 49.5 53.6 54.3 Feb 22.4 64.9 12.8 9.6 54.8 54.1 53.9 Mar 25.7 62.0 12.3 13.4 56.7 55.6 52.2 Apr 24.4 66.3 9.3 15.2 57.6 54.5 49.9 May 21.5 67.1 11.5 10.0 55.0 55.5 52.0 Jun 22.0 66.0 12.0 10.0 55.0 53.9 53.0

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Increased new business contributed to another build up of backlogs of work in June, the ninth in as many months. The rate of accumulation of outstanding business was solid and faster than the UK average, despite having eased from May. Exactly 22% of respondents noted a rise in work that had either not been commenced or was in progress, while 12% posted a fall. The retail sector posted the sharpest accumulation, followed by manufacturing which saw outstanding work rise at the fastest pace in 2014 so far. Meanwhile, more modest increases were seen in the services and construction sectors.


By sector


‘14 Apr 49.3 50.3 57.8 May 55.6 54.0 53.8 Jun 52.1 56.9 52.5

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Q. Is the level of employment at your company higher, the same or lower this month than one month ago?

Employment

Q. Have average input prices or input costs risen, fallen or remained unchanged this month compared to one month ago?

Input Costs

Q. Are the average prices charged for goods and services by your company higher, the same or lower this month than one month ago?

Prices Charged



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June data signalled a further increase in employment at companies in Northern Ireland. Although slowing from the previous month, the rate of job creation remained marked. That said, staffing levels at companies in Northern Ireland rose at a slower pace than the UK average. Employment has now increased on a monthly basis throughout the past year. All four monitored sectors posted job creation, led by retail which was the only category to see a faster rise in employment than in the month before. Solid increases in staffing levels were still recorded elsewhere, however.




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The rate of input cost inflation quickened slightly in June and was much faster than the UK economy average. That said, the rise in input prices in Northern Ireland was still slower than the series average. Where input costs increased, this was linked by panellists to higher raw material and energy prices as well as rising staff costs. The fastest increase in input costs was at construction companies where the rate of inflation quickened during June. Faster rises in input prices were also recorded at manufacturers and service providers over the month. The only sector to post a slower increase in input costs was retail, but the rate of inflation remained strong.



2014 Jan 15.5 77.6 6.9 8.7 54.3 53.6 53.3 Feb 7.6 83.0 9.4 -1.8 49.1 49.0 52.2 Mar 14.1 78.1 7.8 6.3 53.1 52.4 50.8 Apr 11.3 81.7 7.0 4.3 52.1 50.4 51.9 May 9.7 83.7 6.5 3.2 51.6 50.1 51.7 Jun 9.6 85.2 5.2 4.4 52.2 51.6 51.2

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A modest rise in output prices was recorded in June, extending the current sequence of inflation to four months. The rise in charges at Northern Ireland companies was broadly in line with that seen across the UK economy as a whole. Those respondents that increased their output prices indicated that improved client demand had meant they were more able to pass on higher input prices. On the other hand, discounting in order to secure new business was still mentioned by some panellists. Charge inflation was recorded across three of the four monitored sectors, the exception being manufacturing where output prices fell for the second month running.


15 July 2014

By sector


‘14 Apr 57.9 51.9 47.5 May 53.3 49.1 48.3 Jun 53.2 49.3 51.7

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‘14 Apr 66.4 60.0 61.2 May 62.5 57.6 57.7 Jun 63.6 58.8 58.3

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‘14 Apr 51.9 55.8 55.1 May 56.3 58.2 54.7 Jun 53.8 55.1 53.6

15 July 2014

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The graph below shows the regional PMI Output Indexes for the UK. An average of the latest three months is used (see also the table to the right). All UK regions posted sharp rises in business activity on average over the second quarter of 2014, with the fastest rate of expansion seen in the North East. Output in the Republic of Ireland rose at a similar pace to that seen in Northern Ireland.

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The graph below shows the regional PMI Employment Indexes for the UK. An average of the latest three months is used (see also the table to the right). Increased payroll numbers were recorded across all UK regions on average during the second quarter of 2014. Companies in the North West posted the steepest rise in staffing levels, followed by the East of England. Meanwhile, a sharp increase in empoyment was seen in the Republic of Ireland.

London (22.8%) 60.9 60.3 58.4SouthEast (14.9%) 60.4 58.9 58.0NorthWest (9.6%) 59.7 58.5 57.8EastofEngland (8.6%) 59.2 59.1 58.9Scotland (7.8%) 56.3 54.9 55.9SouthWest (7.5%) 60.3 58.6 59.4WestMidlands (7.2%) 59.3 58.2 57.6Yorks&Humber (6.9%) 57.7 57.3 58.1EastMidlands (5.9%) 59.4 59.7 58.4Wales (3.5%) 58.7 59.2 59.3NorthEast (3.1%) 58.3 62.5 64.8N.Ireland (2.2%) 58.7 60.5 59.0UK (100.0%) 59.5 58.9 58.4Rep.ofIreland n/a 57.8 60.0 59.7

London (22.8%) 56.0 57.7 59.7SouthEast (14.9%) 54.8 57.3 58.9NorthWest (9.6%) 56.2 59.0 59.0EastofEngland (8.6%) 55.3 57.8 59.6Scotland (7.8%) 53.3 53.4 54.0SouthWest (7.5%) 55.3 54.4 54.4WestMidlands (7.2%) 54.3 54.5 57.2Yorks&Humber (6.9%) 53.9 57.7 58.5EastMidlands (5.9%) 52.8 56.1 56.0Wales (3.5%) 52.7 52.8 52.0NorthEast (3.1%) 52.5 53.1 54.7N.Ireland (2.2%) 53.7 55.5 55.0UK (100.0%) 55.1 57.1 58.8Rep.ofIreland n/a 56.0 57.1 57.0

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ShareofUK PMIOutputIndex GVA,2012 Last12 Latest3 Latest (NationalStatistics) months months month

Regional Comparisons: Output / Business Activity

ShareofUK PMIEmploymentIndex GVA,2012 Last12 Latest3 Latest (NationalStatistics) months months month

The Purchasing Managers’ Index® (or PMI®) surveys are monthly surveys of carefully selected companies which provide an advance indication of what is happening in the private sector economy by tracking variables such as output, new orders, employment and prices across both manufacturing and service sectors. Index numbers are calculated from the percentages of respondents reporting an improvement, no change or decline on the previous month. These indices vary between 0 and 100 with readings of exactly 50.0 signalling no change on the previous month. Readings above 50.0 signal an increase or improvement; readings below 50.0 signal a decline or deterioration. The greater the divergence from 50.0, the greater the rate of change (expansion or contraction) signalled. The indices are

seasonally adjusted to take into consideration expected variations for the time of year, such as summer shutdowns and national holidays.Sector data published in the Ulster Bank Northern Ireland PMI report are intended to give a indication of underlying trends in the manufacturing, services and construction industries within the Northern Ireland private sector economy. Data at the sector level are more volatile than the headline total private sector economy figures, and month-on-month movements in the sector data should therefore be treated with a degree of caution.

*Exports are defined as sales outside of the United Kingdom.

The Northern Ireland PMI® is issued exclusively for the general information of clients, contacts and staff of Ulster Bank. The contents are not a substitute for specific advice and should not be relied upon as such. Accordingly, whilst every care has been taken in the

preparation of this publication, no representation or warranty is made or given in respect of its contents and no responsibility is accepted for the consequences of any reliance placed on it by any person.

Disclaimer

Ulster Bank and Markit Economics

PMI® Survey Methodology

Regional Comparisons: Employment

New Export Business* Is the level of new export business at your company higher, the same or lower this month than one month ago?

Higher Same Lower Net Index S.Adj'd % % % +/- 50=nochg Index

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Increasing rate of decline

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Northern Ireland companies registered a twelfth successive monthly increase in new business from abroad, although the rate of expansion slowed over the month and was only slight. Higher new orders from clients in the Republic of Ireland were mentioned by a number of firms.

2014 Jan 18.6 69.9 11.6 7.0 53.5 53.9 Feb 19.2 69.9 10.9 8.3 54.1 52.5 Mar 19.4 64.6 16.0 3.4 51.7 52.9 Apr 14.2 76.6 9.2 5.1 52.5 51.6 May 27.6 59.2 13.2 14.4 57.2 54.9 Jun 18.0 66.0 16.0 2.0 51.0 50.7

Documents

Ulster Bank NI PMI, June 2014